Real Estate in Divorce: Selling, Buying, and Financial Risks – Part 2 of 2

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Welcome to WeChat Divorce, hosted by Karen Chalu, Legal Liaison and Catherine Shanahan, CDFA.

Each episode we sit down with divorce professionals and industry experts to provide insights and frank discussions about real people, real situations, and real divorce to help you achieve your best life post divorce.

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Hello everyone, and welcome back to WeChat Divorce and Part 2 of our conversation on dividing real estate and divorce.

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I’m Karen Shalu, Legal Liaison, helping you navigate the legal complexities of divorce with clarity and confidence.

And I’m Catherine Shanahan, Certified divorce financial analyst and your partner in long term financial security.

So in Part 1, we walk through ownership, liability, marital versus separate property, and why understanding your documents matter before you make any decisions.

1:14

And that’s because real estate during divorce isn’t just about who lives in the house.

It’s about credit exposure, equity rights, financial leverage and long term risk.

So now in Part 2, we’re going to move into what happens when a decision is actually made, when you decide to sell, when you decide to refinance, when you decide to split proceeds, or when you think you’re protected because something is written in an agreement.

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This is where we see the biggest financial mistakes, not because people are careless, but because they’re tired.

They want closure, they want stability, they want forward movement.

But selling or dividing real estate during divorce without clear structure can create new problems even when both parties believe they’re being amicable.

2:07

So let’s talk about what really happens when you when you move into the transaction phase of divorce and what you need to think about before signing anything.

All right, now we’re going to move on to #3 now that we know about ownership and marital and separate property, let’s move on.

2:26

What happens when a decision is made then to sell real estate during divorce?

So I’m going to start with an example of a client.

This just in the last couple weeks.

I think most of our examples are within the last couple weeks because every day we, I feel like we could write a book, but this listing agreement came in, I was on the phone with the client and her attorney and I had questions for the attorney about this specific listing agreement.

2:59

I didn’t see a listing price and she said well, that’s normal.

OK, it this was in California.

She said well that’s very normal.

Sometimes they don’t put a listing price just to lock down the broker relationship.

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I said OK, so buyer, and I mean the seller, husband and wife are the seller.

However, we’re going through a divorce here.

So typically when your husband and wife or wife and wife, husband, husband, you can you make that decision together, right as a seller.

3:37

But in divorce, can one spouse make a decision that would benefit them without the other spouse?

Can they make the unilateral decisions?

And so they needed to change the agreement?

No, they can’t.

They had to do seller 1, seller 2.

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So who has, you know, for things like who, who can set the price reductions?

Can one authorize a change in price, a change in seller reductions, anything like that without the other?

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And then the fourth thing in that particular situation was how do parties agree on staging, renovations, maintenance, Like how did they address that?

So I’m making the observation that when you are selling your home and divorce, you need to be very careful and ask your attorney to look at these types of clauses in a listing agreement.

4:35

That’s typically for people who are very amiable.

Husband and wife, right?

Or or spouse and spouse or business owner.

Business owner, whoever it may be, they’re usually have the same goal.

When you have a divorce pending, typically it’s not the same goal.

4:55

And I think you ran into that in your specific, in your personal situation selling your home.

Yeah, don’t bring that up.

I’m still mad about it.

Oh yeah.

Because actually we just held on one more year.

5:11

That’s when the pandemic came home prices.

So but I I actually, I didn’t have control over that.

And that was the agreement was not properly written.

The financial clarity of what would occur and what my responsibility was, but I didn’t have the agreement to back me when he changed his mind.

5:32

And so again, that’s that’s why I love our process and why we formed my divorce solution, is because it’s not just the financial side.

You have to make sure that you have the right documentation.

You ask the right questions to make sure you are legally protected with an agreement so that you’re not back in the courtroom.

5:49

Yeah.

Another issue when selling real estate is if you’re not a titled owner, if one spouse or the other is not on the deed, as the spouse can list your home without your consent, and what do you do with that about that?

Even if you have marital interest, but you cannot sign conveyance or transaction documents.

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So this is something that you would need to discuss with your family law attorney how to protect that marital interest even though your spouse may have full authority to sell that property.

I want to bring up there that even if you think you are the titled owner, you might not be the titled owner.

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So a lot of times people say to their spouses, yes, of course I put you on the title.

Yes, of course I would, you know, give you all the documentation and then 20 and 30 years go by, you never question it.

And then you find out, uh oh, I’m not really the title owner.

Yeah, yeah.

6:45

And even how much ownership interest you may have too.

So when you’re selling real estate, I actually, I want to talk about another recent case where wife had the property as an inheritance prior to the marriage, but when they got married, they wanted to create some portion of that home as marital interest, but she also wanted to retain her separate interest.

7:12

That sounds reasonable, right?

They went to a real estate attorney, got all these very complicated documents, drafted trust and conveyances.

So we’re looking at them and they didn’t seem to reconcile.

So I came up with a whole list of questions and I said, can you just get these clarified?

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Because I’m not sure financially how we build this out on a balance sheet because it’s there.

I’m getting different information from different sources and maybe I’m just not reading it correctly, but please, you know, go ask a real estate estate attorney.

Do you know, a month later, they’re still working on untangling this whole situation.

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And she’s, she’s like deer in the headlight.

Hadn’t she had thought they had, you know, crossed every T and dotted every I?

But that is not what happened.

And so, you know, before they can divide the property or sell the property, these things have to be unpacked and determined legally.

8:16

Well, and I want to bring up here that it’s a lot of work to do that.

We get it, it’s a ton of work and everyone wants to be finished with their divorce.

And this just sounds like something, oh, we’ll take care of that later.

It’s so easy to say that because you’re seeing the light at the end of the tunnel, but it really is important to take pause, get this stuff figured out and taken care of, and make sure you have anything that needs to be signed when you’re signing your final order.

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This way you don’t have to go back to your spouse and hash things out and pay for more attorney fees.

It’s worth it to take the time now.

For sure.

It’s all into, I’m sorry, Karen.

It also goes into the proceeds of a house, right, where those proceeds are being held.

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So many people call and say, OK, we’re selling the home and we’re just going to split the asset so we both have money to pay our attorneys and get our new places.

We’ll hold off.

Wait a minute, you know, where does the proceeds go in your overall agreement?

There’s negotiations that are happening.

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There might be some alimony buyout numbers.

You might not be splitting things 5050.

And if you split an asset before an agreement, I always hear attorneys and judges actually say, well, you already split that asset, we don’t need to talk about it.

So, Catherine, remember the client we had when they split the assets, they sold their home.

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I think this was right after they filed for divorce.

They sold their home, split the assets, bought new property.

Did they buy new property?

No, they couldn’t Have.

They split the assets.

One spouse used all of their half, the other spouse saved it, and then they reconciled.

9:59

Oh, that’s.

Right.

So when they reconciled, that other spouses half became something that they would have to split if they, you know, chose to do a post number divorce later.

So those are very, very important topics to be very aware of when you’re selling real estate.

10:24

We should have, it was nuptial agreement in place.

But when you you have to know that you can escrow these proceeds.

You can still take a portion of it to pay your attorney fees because that’s what they want you to do.

Or set up your new place, whether you’re renting or you’re putting a down payment.

But do a percentage.

10:40

Leave at least 50% there and maybe just 25% each so that you can start your post divorce life sooner than later.

But leave some money there to negotiate and not only to negotiate, but often times one of the parties who gets 50% of the proceeds of the home because the home is generally one or two of the biggest assets that somebody owns, right?

11:00

It’s their retirement accounts at their home generally.

So if you already received those proceeds, what is your ambition to get this divorce finalized?

That’s great.

That’s a great.

There’s no holders.

There’s.

No, OK, we’re coasting along and we’re fine.

11:18

I already got I received the bulk of my asset, have no incentive to negotiate because I either want to piss my spouse off or they’re paying me support for longer than they have to.

There’s a multiple, multiple multitude of reasons why it’s not good to just proceeds from home.

11:37

Yeah.

And if you’re escrowing proceeds for any length of time, you should understand what it’s called an IOLTA account.

IOLTA, that’s when the attorney will retain or both attorneys separately will retain funds in these escrow accounts pending a divorce.

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And if your divorce is pending for a lengthy period of time and you have quite a bit to escrow, you may want to discuss with your attorney a different approach.

Because an IOTA account you’re not going to get interest.

That interest gets donated because the attorneys are not able to retain that interest.

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So we’ve been successful at the attorneys negotiating a savings account where the parties get to receive that interest.

And that’s that can be important if your divorce is going to be going to take some time.

12:33

And again, as we said, always have a written agreement where the money is going to be, who gets to decide when it’s split, things like that.

So it’s either called an agreement or a stipulation, but that’s something that’s very important.

Next, it’s third party owners.

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Just, you know, be very aware if there’s third party owners and ask your attorney, can the family law court divide what marital but the marital state doesn’t fully own, you know, how how to integrate those 30, those third party owners.

13:09

The next thing is those what we call those kitchen table agreements.

Everybody does them right?

And, you know, in the spirit of being amicable, discussions are very helpful to moving your case along.

What we hear is, oh, we’ll just split it later or split during the divorce.

13:30

Well, what if you reconcile like we talked about before?

Or what if you’re in a state where assets are divided at date of divorce and this transaction has not been taken into consideration?

Typically, real estate proceeds can comprise of, you know, a huge portion of what you’re dividing.

13:49

Kitchen table agreements can have conversations like don’t worry, I’ll make sure you get your share.

We’ll work that out.

What you need to know or verbal agreements are not enforceable.

And also those kitchen table agreements, be careful when your spouse says you can have the home, you know you can have the proceeds.

14:11

That doesn’t necessarily mean that they’re not asking you for their marital share from another asset.

So get the details and don’t agree to anything until you’re financially clear.

What are you negotiating?

A way to keep the proceeds from the home.

Yeah, keep it to kitchen table discussions.

14:29

That’s that’s healthy.

Actually, I love kitchen cake table discussions because a lot of people disclose information that they won’t necessarily remember or agree to later, but it’s information for you to have.

So it’s healthy to have those conversations because again, you account for the emotional value to any asset or debt.

14:48

But take notes and get financially clear before you decide to agree.

So Catherine, let’s talk about alternatives to dividing real estate during divorce and what people should be thinking about when they need to physically or decide to not need to whatever decide to physically separate.

15:11

Well, you know, you have to think about are you going to rent during separation or you know, are you living in the marital home?

You know, renting to me even during separation, but even post divorce before you buy a new place, renting during separation can provide some flexibility, can give you a chance to see if you really want to keep the marital home or not.

15:32

You know, would it be better to move on to a new place.

It avoids some premature asset division like I just talked about, negotiating away another valuable asset to be, you know, house poor as some people are.

It also can prevent you from using marital funds impulsively.

15:50

You know, you go buy a place thinking that you have to keep your kids someplace that they’re used to.

Or you buy a place because you can’t imagine leaving the town and now you’re stuck there for a while or you lose money on the sale because it happened so fast.

You know, I remember renting.

16:06

I thought I’ll rent from one for one year.

The marital home was too large.

I did not want to spend all of my support maintaining the home.

So I rented a mile away so my son can just go back and forth whenever he wanted to.

He was in high school.

And that one year turned into three years because I just wasn’t.

16:24

Oh no.

Because I he end up going to college and I couldn’t leave at that time.

I wanted to be able to drive to every one of his football games.

But then I left the state.

I moved to South Carolina, and I was really happy about that.

And I’m glad that I didn’t, you know, stick myself in an area that I thought I had to stay.

16:41

Yeah.

And for me, I was really young, but I was so overwhelmed with parenting 2 small children and just navigating the divorce.

I wanted as small of a place as possible because that’s was just less for me to have to deal with.

16:58

But it also helped me reset to what I wanted to buy in the future.

And so I took two or three years to make my purchase decision.

And even though some people feel we are throwing away money paying rent, for me it worked out really well because I was able to take the time needed to determine where I wanted to establish my new home moving forward.

17:24

You know, we talked about that with a client last week, and she really wanted to keep one of the homes, but it became apparent that the cost of running that home was really going to dip into the lifestyle that she wanted.

You know, she’s retired and pay, although paying rent was the same as what her mortgage payment would be.

17:45

She didn’t have the responsibility.

She wouldn’t have the responsibility of, you know, replacing the roof, maintaining the home.

And that gives somebody a set sense of freedom while even if for a year or two, to really determine where you want to live with the rest of your life.

18:03

For sure, let’s talk about exclusive use of the marital home.

Yeah, you, you need to have a temporary order for that.

You need to have a negotiated agreement.

It could help stabilize your children, but just make sure you have those terms.

18:20

You know, a lot of times people get upset because their spouse just comes into the home whenever they want to.

You know, there’s no sense of privacy, right?

So you definitely have to have negotiated terms and put an order in place and and who’s responsible for the expenses and does anybody get a credit for that moving forward?

18:38

Are you getting support or spouse still paying it under this temporary order?

So make sure you’re clear on what’s involved with exclusive use of the marital home.

And I want to just bring up another recent case where our client didn’t feel like her spouse was maintaining the home.

18:56

They need to put it on the market.

They’ve decided all of that is done, but she really felt like she needed exclusive use of the marital home and so they were going to temporary orders and going to be the roll of the dice.

But she said there’s another home that my spouse can live in.

19:15

They go to the temporary hearing and it turns out that her spouse’s attorney had no idea there was another home available for her client to move to.

And just by virtue of that, she got exclusive use of the marital home so that she could stage it to sell it.

19:34

She was essentially she was staying with friends.

She had no place to go and she couldn’t go to the other property because it’s separate property.

So it all turned out, but she had to go armed with the necessary information and documentation so that the court could make a decision.

19:51

And in this particular event, spouse’s attorney needed to be informed.

So don’t just make assumptions that it’s going to be hard.

Maybe everyone doesn’t have all of the, you know, data needed to make those decisions.

Well, I’m glad you bring this up, but I think I know who you’re talking about.

20:09

It’s another example of someone coming to us thinking that did not have any information that their spouse was a narcissist or what have you.

And she didn’t never controlled anything and she didn’t know anything about the finances.

And although she doesn’t have access to a lot of documentation, she had the recall of their marital state.

20:30

And through going through our process, we were able to make sure she was financially clear because she had to advocate for herself with her attorney, which is why the other side was not prepared because they didn’t work with their client probably.

But it didn’t matter to us because I love seeing that she really did get confidence in the information that we were able to review with.

20:50

Her for sure.

The next one is Co ownership after divorce Catherine.

You deal with these situations a lot, especially because so many people had that pandemic, as we call it, interest rate, which is wonderful.

21:06

But if you are going to consider Co ownership after divorce, Catherine, can you take them through a little bit of considerations as our last point here?

Because it’s sometimes it is advisable.

You know, a lot of times, especially this was a lot in California, you know, there was no place to go or their homes weren’t even resalable yet and they had small children still in school.

21:29

So, you know, you can work out an agreement that you, you know, you own your home until a certain time, at a certain point in time, but you must have a written agreement.

You must discuss what you’re each thinking.

You have to have an exit strategy.

You have to define the responsibilities of each party.

21:46

What is the timeline for this?

You know, even if you go off your agreement, you have to have an agreement to fall back on.

You know, one house may have different thoughts than the other.

We’ll discuss what those thoughts are and make sure you’re both protected actually and you have an agreement to fall back on in case your minds change year later because everything seems agreeable this time.

22:11

But a year can go by and people move on to other relationships and now you’re feeling differently.

So make sure you have that agreement in place.

And even if you have a really strict agreement in place, you don’t have to follow it.

The two of you, if you’re Co parenting greatly and you’re working together greatly after divorce, you can make your own terms as long as you have something to fall back on.

22:32

For sure.

And if you’re making agreements in in these types of spaces where you’re retaining obligation that you wouldn’t have otherwise, it’s very important to work with your attorney to make sure the enforcement that there’s a really strong enforcement provisions like who can list the home for sale if someone’s late on a payment, you know, if something happens, who’s going to help repair?

22:57

Is the increase in the value of the home going to be divisible or not?

There’s so many variables there that need to be worked out.

So if you’re very focused on, you know, giving a spouse time to be able to assume or refinance or you know, time for the children to grow up there and while you’re being amicable, make sure you have really good provisions in that agreement.

23:24

OK, Karen, we could talk on and on and on about real estate and I don’t even know if this will be one or two episodes, but let’s just do a little closing here.

There are four things that you must really know about real estate during divorce.

And if there’s one take away from today, it’s this.

23:39

Before you sell it, before you refinance it, before you buy something new, and before you sign anything.

Real estate decisions during divorce are not just emotional decisions and they’re not just legal decisions.

They are financial risk decisions.

23:56

For sure, pausing is important.

Understanding the difference between the note, the security instrument and the deed isn’t about becoming a lawyer, or a banker for that matter.

It’s about understanding where your credit is exposed, where your equity sits, where your liability lives, and what control you actually have.

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Because assumptions in divorce can be very expensive, Clarity is protective.

We see people make fast decisions because they want stability, they want closure, or they just want out, and that’s completely understandable.

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But the house is often one of the largest financial assets in a marriage, and how you handle it can affect your credit, your retirement, your cash flow and your future borrowing power.

That’s fine.

We always say before you negotiate the real estate, understand your financial portrait.

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You can know what you own, know what you owe, know what’s marital, know what’s separate, and know the long term impact.

At My Divorce Solution, we help you slow down just enough to make smart decisions, not reactive ones.

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Because confidence and divorce doesn’t come from rushing, it comes from financial clarity.

Thanks for joining us on WeChat Divorce.

Please leave a comment or a question or another topic you would like us to talk about.

We’re here to help you protect your future, one informed decision at a time.

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